In the below figure, a consumer is initially in equilibrium at point C. The consumer’s income is $250, and the budget line through point C is given by $250 = $50X + $125Y. When the consumer is given a $100 gift certificate that is good only at store X, she moves to a new equilibrium at point D. "The horizontal axis is labeled Product X. The vertical axis is labeled Product Y. A line begins at point A on the vertical axis goes down to the right and ends at point E on the horizontal axis. A second line parallel to the first one begins at point B in the first quadrant close to point A, goes down to the right and ends at point F on the horizontal axis. A horizontal line connects point A and B. An upward-facing curve labeled l-subscript 1 begins at the top left of the quadrant along the vertical axis, goes down to the right in decreasing steepness, intersects the horizontal line [AB], meets the first line at point C then continues with increasing to the right and above the line to exit the right of the quadrant. An upward-facing curve labeled l-subscript 2 begins at the top left of the quadrant, goes down to the right in decreasing steepness, meets the second line at point D then continues with increasing steepness to the right and above the line to exit the right of the quadrant." a. Determine the prices of goods X and Y. Price of X: $ Price of Y: $ b. How many units of product Y could be purchased at point A? c. How many units of product X could be purchased at point E? d. How many units of product X could be purchased at point B? e. How many units of product X could be purchased at point F? f. Based on this consumer’s preferences, rank bundles A, B, C, and D in order from most preferred to least preferred. g. Is product X a normal or an inferior good?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

In the below figure, a consumer is initially in equilibrium at point C. The consumer’s income is $250, and the budget line through point C is given by $250 = $50X + $125Y. When the consumer is given a $100 gift certificate that is good only at store X, she moves to a new equilibrium at point D.

"The horizontal axis is labeled Product X. The vertical axis is labeled Product Y. A line begins at point A on the vertical axis goes down to the right and ends at point E on the horizontal axis. A second line parallel to the first one begins at point B in the first quadrant close to point A, goes down to the right and ends at point F on the horizontal axis. A horizontal line connects point A and B. An upward-facing curve labeled l-subscript 1 begins at the top left of the quadrant along the vertical axis, goes down to the right in decreasing steepness, intersects the horizontal line [AB], meets the first line at point C then continues with increasing to the right and above the line to exit the right of the quadrant. An upward-facing curve labeled l-subscript 2 begins at the top left of the quadrant, goes down to the right in decreasing steepness, meets the second line at point D then continues with increasing steepness to the right and above the line to exit the right of the quadrant."

a. Determine the prices of goods X and Y.

Price of X: $

Price of Y: $

b. How many units of product Y could be purchased at point A?

c. How many units of product X could be purchased at point E?

d. How many units of product X could be purchased at point B?

e. How many units of product X could be purchased at point F?

f. Based on this consumer’s preferences, rank bundles A, B, C, and D in order from most preferred to least preferred.

g. Is product X a normal or an inferior good?

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions